Skip to main content

Money Matters - Master the rebalancing act

Rising markets offer an opportunity to move money from equity to debt. But when both are doing well, one needs to be cautious

Soon after the stock market touched the 20,000 mark on September 21, talks ensued whether a correction was in the offing. This was followed by anxious investors wanting to know - should we book profits or remain invested? An investor should rebalance his/her portfolio whenever the market moves very high.

While that is one thumb rule, the other one is to rebalance your portfolio regularly (irrespective of the market movement) and maintain the quintessential debt-equity ratio of 30:70. Typically, for a long-term investor, market levels should not matter.

But, if you are six months to one year away from your investment horizon, experts say rejig your portfolio between different asset classes. Reason: Closer to the goal, capital protection is more important. Shift gradually from equity to debt.

But, if you are started investing in January 2008 for his further studies, which he plans in twothree years, do not even touch your investment. Such individuals should be focussed on their goal and may slightly realign their investment within the same asset class. For instance, if Mishra has higher exposure to large-caps, he can safely move 5-10 per cent from there to mid- or small-caps as in rising markets, these stocks move faster as they are high beta stocks.

Of course your exposure to riskier segments like mid- and small-caps depends on your risk appetite.

If you are not going for a major rejig, at least book profits. And, invest that amount to buy contrarian sectors/stocks. But, do not disturb your portfolio if it is up by just 10-15 per cent because at any point in time a small correction can wipe off such gains.

Never move out of markets completely, warns experts, because it becomes difficult to identify an entry point. If you do not or cannot manage your portfolio actively, mutual funds is the best option. Or, you can invest in balanced funds, where asset allocation changes automatically.

Experts say debt portfolio needs to be managed more carefully than equities. The interest rate changes frequently with the Reserve Bank of India's Monetary Policy Reviews. Therefore, it is more important to know your investment horizon and invest in the best debt product for that time period. For instance, for a horizon of over two years, short-term debt funds fare well when interest rate are going down and debt-oriented hybrid when they are flat. In a rising interest rate scenario, fixed maturity plans (FMPs) make for a good debt investment option.

As for new entrants, never make the mistake of investing a large amount at one go. Use a systematic investment plan (SIP) in mutual funds to invest regularly.

WHAT TO DO?

Rebalance your portfolio regularly

Market levels should not guide your investment

Move to debt if you are nearing your investment horizons

Book small profits or rejig only if your portfolio has risen over 20 per cent

Debt needs to be more actively tracked than equity

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...

Perpetual SIP - Its Advantages

Retail investors have taken a fancy to investing in mutual funds through systematic investment plans (SIPs). As per industry estimates, Rs 4,000 crore flows into SIPs every month. One way to take advantage of SIPs in a true long-term manner is to opt for a perpetual SIP 1. What is a perpetual SIP? In an SIP , you make periodic investments in a mutual fund scheme of your choice generally every month for a pre defined tenure. While signing up an SIP mandate , you have the option to leave the end-date column blank. If the column is blank, it means the investor has opted for a perpetual SIP . Most fund houses assume this SIP will continue till December 2099 unless you give a written communication to stop it. However, some fund houses require you to tick the `perpetual option'. 2. What are the advantages of perpetual SIPs? Registering an SIP involves a lot of paperwork and it takes time. It is observed that many investors skip their SIP instalments when they go for short-tenure option...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now